Symphony Environmental Tech. PLC Preliminary Results (6322H)

TIDMSYM

RNS Number : 6322H

Symphony Environmental Tech. PLC

14 March 2018

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is considered to be in the public domain.

 
   14 March 2018 
 
 

SYMPHONY ENVIRONMENTAL TECHNOLOGIES PLC

("Symphony", the "Company" or "the Group")

Preliminary Results for the year ended 31 December 2017

Symphony Environmental Technologies Plc (AIM: SYM), a global specialist in products and technologies that "make plastic smarter", is pleased to announce its preliminary results for the year ended 31 December 2017.

Financial highlights:

   --      Revenues increased by 21.6% to GBP8.27 million (2016: GBP6.80 million) 
   --      Gross profit increased by 17.8% to GBP4.01 million (2016: GBP3.41 million) 
   --      EBITDA before R&D increased by 57.9% to GBP1.20 million (2016: GBP0.76 million) 
   --      Profit before tax increased by 249.6% to GBP0.43 million (2016: GBP0.12 million) 
   --      Profit after tax increased by 156.0% to GBP0.43 million (2016: GBP0.17 million) 
   --      Basic earnings per share increased to 0.28p (2016: 0.11p) 
   --      Cash generated from operations GBP1.03 million (2016: cash used GBP0.34 million) 

-- Improved working capital position with net cash of GBP0.63 million (2016: net debt GBP0.37 million)

   --      Distributable reserves of GBP0.07 million (2016: retained deficit GBP3.97 million) 

Operational highlights:

-- Saudi Standards, Metrology and Quality Organisation ("SASO") started enforcing legislation requiring the use of oxo-biodegradable plastic

-- Symphony was the first organisation to be awarded the SASO Quality Mark for its d2w oxo-biodegradable additives and to achieve authorised supplier status for the Saudi Arabian market

   --      Launched d2p anti-microbial gloves into Wilko in the UK and several retail outlets in Italy 
   --      Launched d2p anti-microbial masterbatch for use in water pipes in Pakistan 
   --      Continued significant investment in R&D 

Chief Executive, Michael Laurier, said:

"The year under review saw a continued improvement in the Group's financial performance - revenues, profits and cash generation have all increased and we are now free of debt. Throughout the year we have explained to governments, potential customers and NGOs the benefits of using our growing range of technologies, and in particular, d2w oxo-biodegradable plastic, which can help to solve the problem of persistent plastic pollution. Most of our revenues still derive from d2w and are earned mainly outside of the EU and the United States.

"We expect to see an improving business environment where more countries legislate in favour of our type of technology, and with better enforcement in countries where legislation has already been passed.

"The desire to find a solution to the plastics problem has reached tipping point. Our technology is proven, viable and does not significantly increase cost or disrupt the supply chain. Given our market positioning, we are increasingly confident on the outlook of the Group, both within our existing markets, and also into new markets in the year ahead."

Enquiries

 
 Symphony Environmental Technologies 
  Plc 
 Michael Laurier, CEO                  Tel: +44 (0) 
                                        20 8207 5900 
 Ian Bristow, CFO 
 www.symphonyenvironmental.com 
 
 Cantor Fitzgerald Europe 
 David Foreman/Richard Salmond         Tel: +44 (0) 
  (Corporate Finance)                   20 7894 7000 
 Alex Pollen (Sales) 
 
 Blytheweigh 
 Tim Blythe                            Tel: +44 (0) 
                                        20 7138 3204 
 Nick Elwes 
 

Chairman's Statement

I am very pleased to report a 249.6% increase in profit before tax to GBP430,000 (2016: GBP123,000) together with GBP1.03 million cash generated from operations (2016: cash consumed GBP0.34 million). With the business now in a net cash position and with its technologies gaining increasing commercial traction, together with elevated political and media coverage, the Group has never been so well positioned in its key markets.

Our d2w oxo-biodegradable plastic technology fits in perfectly with many governments' core principles of the 3 Rs, "reduce, re-use, recycle". However, unlike ordinary plastics, a plastic upgraded with d2w technology does not cause the accumulation of microplastics in the environment, as it converts much more rapidly into biodegradable materials. In addition to making conventional plastic more environmentally friendly, d2w can be used in some bio-based plastics which would not otherwise degrade in the open environment. This flexibility makes d2w a vital insurance policy for many types of plastics, some of which inevitably end up in the open environment.

Microplastics are the main concern today, and they are caused by ordinary plastics fragmenting on land and in the oceans. They need to be urgently upgraded with d2w technology, and this is already being done in the Middle East, Africa and Asia - most recently in Saudi Arabia.

Over the years we have established a strong distribution network with 74 distributors worldwide. In the year ahead one of the Company's objectives will be to increase its lobbying and marketing to make sure that everyone understands the huge benefits that Symphony's d2w and d2p technologies can bring to the environment and human health. Our strategy, as previously reported, was to expand the product range with synergistic technologies which can be offered to the same customer base, and I am pleased to report that this is progressing well.

Revenues for the year increased by 21.6% to GBP8.27 million (2016: GBP6.80 million), with gross profits increasing by 17.8% to GBP4.01 million (2016: GBP3.41 million). The improved revenue was due to increased sales of d2w oxo-biodegradable plastic additives in several markets. These markets include South America and the Far East, but momentum has been most apparent in the Middle East, and in particular Saudi Arabia, where legislation requires the use of oxo-biodegradable technology for everyday plastic items made in or imported into the country. Enforcement of the legislation commenced during 2017.

The overall results highlight the operational gearing of the Group. Additionally, the Group effectively removed borrowings from the balance sheet as at year-end which was further enhanced by the completion of a capital-reduction during the second half of the year. This, along with the profit generated in the year, resulted in a consolidated retained-earnings position of GBP67,000 (2016: deficit GBP3.97 million).

I would like to thank the distributors, staff and Board for all their hard and effective work in 2017, and we look forward with confidence.

N Deva DL FRSA MEP

Chairman

Chief Executive's review

Introduction

I am pleased to report that the year under review saw a continued improvement in the Group's financial performance. Our strategy throughout the year was to engage with governments, NGOs and media globally, explaining to them the benefits of using our growing range of technologies, and in particular, d2w oxo-biodegradable plastic, which can help to resolve the problem of persistent plastic pollution.

Although Europe is not currently an important market for d2w, we note that the EU Commission have taken an interest in oxo-biodegradable plastic and have asked the European Chemicals Agency ("ECHA") to consider its environmental credentials. The Commission do not as yet understand that the purpose of oxo-biodegradable technology is not to produce microplastics but to ensure that if plastic does fragment in the open environment it will convert much more quickly into biodegradable materials. We therefore welcome the reference to ECHA. Symphony and the Oxo-biodegradable Plastics Association will be assisting ECHA with all necessary technical information, but we do not expect any conclusions for some time.

The EU has been slow to realise the importance of this issue, as countries in the Middle East and other parts of the world have already legislated to require the use of oxo-biodegradable technology. These countries want plastic fragments to be dealt with quickly and automatically, and not to be left as a problem for future generations.

In Saudi Arabia, the Saudi Standards, Metrology and Quality Organisation ("SASO") started enforcing legislation requiring the use of oxo-biodegradable plastic for a range of locally manufactured and imported plastic products including carrier bags, packaging films and agricultural films. Symphony was the first company to be awarded the SASO Quality Mark for its d2w oxo-biodegradable additives and to achieve authorised-supplier status for the Saudi Arabian market.

This year saw the completion of two R&D projects for d2p; being anti-microbial household gloves and plastic water pipes. The anti-microbial gloves were launched into Wilko in the UK, and into several Italian retail outlets. An initial order was also received from the Middle East.

As previously reported, we have many customer-led d2p development projects, with applications including anti-microbials, insecticide, flame retardant, odour and moisture adsorbers, rodent repellents and corrosion inhibitors.

Trading results

Group revenues increased by 21.6% to GBP8.27 million from GBP6.80 million in 2016. Gross profit margins slightly decreased to 48.5% from 50.1% in 2016. As a result, the contribution from gross profit increased by 17.8% to GBP4.01 million from GBP3.41 million in 2016. The majority of our revenues derive from d2w and are earned mainly outside of the EU and the United States.

Costs increased by 6.9% to GBP3.30 million (2016: GBP3.10 million) due mainly to increased investment in R&D, lobbying and marketing, with associated travel expenditure into our key operating markets. The Group expensed R&D costs of GBP625,000 in 2017 (2016: GBP514,000).

EBITDA before R&D is a key metric for the Board, and it increased by 57.9% to GBP1.20 million (2016: GBP0.76 million), showing the underlying profitability of the business as it has moved from a net debt position to a net cash position, and its new technologies continue to be commercialised.

EBITDA before R&D is calculated as follows:

 
                               2017       2016 
                            GBP'000    GBP'000 
------------------------  ---------  --------- 
 Operating profit               478        145 
 Add: Depreciation               78         86 
        Amortisation             16         13 
        R&D expenditure         625        514 
------------------------  ---------  --------- 
 
                              1,197        758 
------------------------  ---------  --------- 
 

Due to the operational gearing of the Group, operating profit increased by 229.7% to GBP0.48 million from GBP0.15 million in 2016. This resulted in a 249.6% increase in profit before tax of GBP0.43 million (2016: profit GBP0.12 million).

The Group therefore reports a profit after tax for 2017 of GBP0.43 million (2016: profit GBP0.17 million) with basic earnings per share of 0.28 pence (2016: 0.11 pence).

The Group's primary selling-currency is the US Dollar and therefore a strong dollar against sterling is beneficial for the Group. The Group self-hedges by purchasing goods in US Dollars, and utilises forward rate agreements to minimise exchange risk. As at 31 December 2017, the Group had a net balance of US Dollar assets totalling $1.08 million (2016: $0.91 million).

Balance sheet and cash flow

The Group had net cash in the bank of GBP0.63 million at the year-end (2016: net debt of GBP0.37 million) and had generated cash of GBP1.03 million from operations (2016: cash used GBP0.34 million). This was achieved by improving profits as detailed above, together with improved payment terms in one of its main markets. There was a minimal GBP2,000 hire purchase debt as at the year-end compared to GBP0.81 million of interest-bearing debt at the end of 2016. The Group also has, if required, a GBP1.5 million trade finance facility and a further GBP0.50 million working capital facility with HSBC Bank. The Board do not envisage any working capital constraints as sales increase.

During the second half of the year the Company completed a capital reduction, which eliminated GBP3.61 million of share premium by transferring this to the credit of retained earnings. Together with the results for the year, the Group's retained earnings were GBP67,000 (2016: deficit GBP3.97 million) with Company retained earnings of GBP1.13 million (2016: deficit GBP2.71 million).

The Board has considered the possible effects of Brexit on the business and due to its global operations, is comfortable that this should not significantly affect the Group's future prospects.

Outlook

We expect to see an improving business environment where more countries legislate in favour of our type of technology, and with better enforcement in countries where legislation has already been passed.

The desire to find a solution to the plastics problem, and in particular microplastics, has reached tipping point. Our technology is proven, viable and does not significantly increase cost or disrupt the supply chain. This should make our entry into new markets and with new customers much easier than for disruptive technologies.

Our strategy for 2018 is to drive sales through an increased level of communications on a global scale, increasing our social media presence, together with media campaigns, lobbying and direct selling. We will announce these to the market at the relevant times.

We will continue with our R&D programme and maintain progress in commercialising our technologies including, at the earliest opportunity, our d2p projects, some of which require regulatory clearances, and some require the completion of customer-led product trials.

I would also like to thank all the staff at Symphony and our extended family of distributors for their hard and effective work and their continued commitment to the Symphony vision of being world leaders in "making plastic smarter" technologies and products.

Michael Laurier,

Chief Executive

Consolidated statement of comprehensive income

for the year ended 31 December 2017

 
                                                  2017              2016 
                              Note    GBP'000   GBP'000   GBP'000   GBP'000 
---------------------------  -----  ---------  --------  --------  -------- 
 
 
 Revenue                                          8,267               6,801 
 
 
 Cost of sales                                  (4,255)             (3,395) 
 
 Gross profit                                     4,012               3,406 
 
 Distribution costs                               (237)               (176) 
 
 Administrative 
  expenses - recurring                (3,297)             (3,031) 
 Administrative 
  expenses - non-recurring                  -                (54) 
                                    ---------            -------- 
 Administrative 
  expenses                                      (3,297)             (3,085) 
 
 Operating profit 
  - before non-recurring 
  items                                   478                 199 
 Operating loss 
  - non-recurring                           -                (54) 
---------------------------         ---------            -------- 
 Operating profit                                   478                 145 
 
 Finance costs                                     (48)                (22) 
 
 
   Profit for the 
   year before tax                                  430                 123 
 
 Taxation                                             -                  45 
 
 
   Profit for the 
   year                                             430                 168 
---------------------------  -----  ---------  --------  --------  -------- 
 
 Total comprehensive 
  income for the 
  year                                              430                 168 
---------------------------  -----  ---------  --------  --------  -------- 
 
 Basic earnings 
  per share                      2                0.28p               0.11p 
 Diluted earnings 
  per share                      2                0.27p               0.10p 
---------------------------  -----  ---------  --------  --------  -------- 
 

All results are attributable to the parent Company equity holders. There were no discontinued operations for either of the above periods.

Consolidated statement of financial position

as at 31 December 2017

 
 
                                     2017      2016 
                                  GBP'000   GBP'000 
------------------------------   --------  -------- 
 Assets 
 Non-current 
 Property, plant and 
  equipment                           291       298 
 Intangible assets                     47        62 
 
                                      338       360 
 Current 
 Inventories                          567       416 
 Trade and other receivables          992     1,576 
 Cash and cash equivalents            631       437 
 
                                    2,190     2,429 
 
   Total assets                     2,528     2,789 
-------------------------------  --------  -------- 
 
 Equity 
 Equity attributable 
  to shareholders of 
  Symphony Environmental 
  Technologies plc 
 Ordinary shares                    1,516     1,499 
 Share premium                          -     3,533 
 Retained earnings/(deficit)           67   (3,971) 
 
 
   Total equity                     1,583     1,061 
-------------------------------  --------  -------- 
 
 Liabilities 
 Non-current 
 Interest bearing loans 
  and borrowings                        -         2 
 
                                        -         2 
 Current 
 Interest bearing loans 
  and borrowings                        2       808 
 Trade and other payables             943       918 
 
                                      945     1,726 
 
   Total liabilities                  945     1,728 
-------------------------------  --------  -------- 
 
 Total equity and liabilities       2,528     2,789 
-------------------------------  --------  -------- 
 

These financial statements were approved by the Board of Directors on 13 March 2018 and authorised for issue on 13 March 2018.

Consolidated statement of changes in equity

for the year ended 31 December 2017

Equity attributable to the equity holders of Symphony Environmental Technologies plc:

 
                           Share       Share     Retained     Total 
                         capital     premium    earnings/    equity 
                                                (deficit) 
                         GBP'000     GBP'000      GBP'000   GBP'000 
---------------------  ---------  ----------  -----------  -------- 
 For the year 
  to 31 December 
  2017 
 Balance at 1 
  January 2017             1,499       3,533      (3,971)     1,061 
 
 Issue of share 
  capital                     17          75            -        92 
 Capital reduction             -     (3,608)        3,608         - 
 
   Transactions 
   with owners                17     (3,533)        3,608        92 
---------------------  ---------  ----------  -----------  -------- 
 
 Total comprehensive 
  income for the 
  year                         -           -          430       430 
---------------------  ---------  ----------  -----------  -------- 
 
   Balance at 31 
   December 2017           1,516           -           67     1,583 
---------------------  ---------  ----------  -----------  -------- 
 
 
 For the year 
  to 31 December 
  2016 
 Balance at 1 
  January 2016             1,499       3,533      (4,139)       893 
 
 Total comprehensive 
  income for the 
  year                         -           -          168       168 
---------------------  ---------  ----------  -----------  -------- 
 
   Balance at 31 
   December 2016           1,499       3,533      (3,971)     1,061 

---------------------  ---------  ----------  -----------  -------- 
 

Consolidated cash flow statement

for the year ended 31 December 2017

 
                                 Note      2017      2016 
                                        GBP'000   GBP'000 
------------------------------  -----  --------  -------- 
 
 Operating activities 
 Net cash generated/(used) 
  in operations                     4     1,033     (343) 
 Tax received - R&D 
  tax credits                                 -        45 
------------------------------  -----  --------  -------- 
 
   Net cash generated/(used) 
   in operating activities                1,033     (298) 
 
 Investing activities 
 Additions to property, 
  plant and equipment                      (84)       (8) 
 Additions to intangible 
  assets                                    (1)       (2) 
 Proceeds from sale 
  of fixed assets                            10        11 
------------------------------  -----  --------  -------- 
 
 Net cash (used)/generated 
  in investing activities                  (75)         1 
 
 Financing activities 
 Movement in working 
  capital facility                        (625)       464 
 Movement in finance 
  lease liability                           (4)       (4) 
 Proceeds from share 
  issue                                      92         - 
 Interest paid                             (48)      (22) 
------------------------------  -----  --------  -------- 
 
 Net cash (used)/generated 
  in financing activities                 (585)       438 
 
 Net change in cash 
  and cash equivalents                      373       141 
 Cash and cash equivalents, 
  beginning of year                         258       117 
 
   Cash and cash equivalents, 
   end of year                              631       258 
------------------------------  -----  --------  -------- 
 
 
 

The reconciliation to the cash and cash equivalents as reported in the statement of financial position is as follows:

 
                                      2017       2016 
                                   GBP'000    GBP'000 
------------------------------   ---------  --------- 
 Loans and receivables: 
  Cash at bank and in 
   hand                                631        437 
 Financial liabilities 
  measured at amortised 
  cost: 
  Bank overdraft                         -      (179) 
-------------------------------  ---------  --------- 
 
   Cash and cash equivalents, 
   end of year                         631        258 
-------------------------------  ---------  --------- 
 

Notes to the Preliminary Statement

   1              Basis of preparation 

This preliminary statement has been prepared on the basis of accounting policies consistent with the audited financial statements for the year ended 31 December 2017.

The financial information set out in this report does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016 but is derived from the 2017 accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered in due course. The auditor has reported on the financial statements for the year ended 31 December 2017; its report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and (iii) did not contain a statement under section 498(2) or section 498(3) of the Companies Act 2006.

   2              Earnings per share and dividends 

The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options and warrants.

Reconciliations of the loss and weighted average numbers of shares used in the calculations are set out below:

 
 
 Basic and diluted                       2017            2016 
-----------------------------  --------------  -------------- 
 
 Profit attributable               GBP430,000      GBP168,000 
  to equity holders of 
  the Company 
-----------------------------  --------------  -------------- 
 
   Weighted average number 
   of ordinary shares 
   in issue                       151,089,240     149,939,377 
-----------------------------  --------------  -------------- 
 
   Basic earnings per              0.28 pence      0.11 pence 
   share 
-----------------------------  --------------  -------------- 
 
 
   Dilutive effect of 
   weighted average options 
   and warrants                     5,856,073      15,794,717 
 
 Total of weighted average 
  shares together with 
  dilutive effect of 
  weighted options                161,014,667     165,734,094 
-----------------------------  --------------  -------------- 
 
   Diluted earnings per            0.27 pence      0.10 pence 
   share 
-----------------------------  --------------  -------------- 
 

No dividends were paid for the year ended 31 December 2017 (2016: GBPnil).

A total of 15,781,500 options and warrants were outstanding at the end of the year which may become dilutive in future years.

   3              Segmental reporting 

The Board has reviewed the requirements of IFRS 8 "Operating Segments", including consideration of what results and information the Board (the Chief Operating Decision Maker) reviews regularly to assess performance and allocate resources, and concluded that all revenue falls under a single business segment. The Directors consider that the business does not have separate divisional segments as defined under IFRS 8. The Board assesses the commercial performance of the business based upon a single set of revenues, margins, operating costs and assets.

   4              Net cash used from operations 
 
                                                2017       2016 
                                             GBP'000    GBP'000 
-------------------------------  ---  ---  ---------  --------- 
 
 Profit after tax                                430        168 
 Adjustments for: 
   Depreciation                                   78         86 
   Amortisation                                   16         13 
    Loss on disposal of 
    tangible assets                                3         10 
     Foreign exchange                            (5)       (25) 
   Tax credit                                      -       (45) 
   Interest expense                               48         22 
 Changes in working capital: 
   Inventories                                 (151)         62 
   Trade and other receivables                   579      (694) 
   Trade and other payables                       35         60 
 
 Cash generated/(used) 
  in operations                                1,033      (343) 
-----------------------------------------  ---------  --------- 
 
   4          Availability of report and accounts 

The Company will advise when copies of the Annual Report and Accounts will be sent to shareholders and be available from the Company's website www.symphonyenviornmental.com

NOTES TO EDITORS:

About Symphony Environmental Technologies plc

Symphony has developed and continues to develop, controlled-life plastic technology which helps tackle the problem of microplastics by turning ordinary plastic at the end of its service-life into biodegradable materials. It is then no longer a plastic and can be bioassimilated in the open environment in the same way as a leaf. The technology is branded d(2) w(R) and appears as a droplet logo on many thousands of tonnes of plastic packaging and other plastic products around the world. In some countries oxo-biodegradable plastic is mandatory.

To view a BBC World Service short film introducing d2w oxo-biodegradable (controlled-life) plastic technology please click on the following links:

From within the UK- http://www.symphonyenvironmental.com/d2w/d2w-brochure-5/

From outside of the UK - http://www.bbc.com/storyworks/the-british-bid/symphony

In addition, Symphony has developed a range of additives, concentrates and master-batches marketed under its d2p(R) brand, which can be incorporated in a wide variety of plastic and non-plastic products so as to give them protection against many different types of bacteria, fungi, algae, moulds, and insects, and against fire. d2p products also include odour, moisture and ethylene adsorbers as well as other types of food preserving technologies. We have also launched d2p anti-microbial household gloves and are developing a range of other d2p retail finished products.

Symphony has also developed the d(2) Detector(R), a portable device which analyses plastics and detects counterfeit products. This is useful to government officials tasked with enforcing legislation. Symphony's d(2) t tagging and tracer technology is also available for further security.

Symphony has a diverse and growing customer-base and has established itself as an international business with 74 distributors around the world. Products made with Symphony's plastic technologies are now available in nearly 100 countries and in many different product applications. Symphony is accredited to ISO9001 and ISO14001.

Symphony is a member of The Oxo-biodegradable Plastics Association (www.biodeg.org) (OPA), the Society for the Chemical Industry (UK), and the Pacific Basin Environmental Council. Symphony actively participates in the Committee work of the British Standards Institute (BSI), the American Standards Organisation (ASTM), the European Standards Organisation (CEN), and the International Standards Organisation (ISO).

Further information on the Symphony Group can be found at www.symphonyenvironmental.com and twitter @SymphonyEnv

.

This information is provided by RNS

The company news service from the London Stock Exchange

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March 14, 2018 03:01 ET (07:01 GMT)